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For decades, the United States has worked toward the resolution of the Israeli-Palestinian conflict, most recently under the 2003 Roadmap for Peace, which calls for an independent Palestinian state coexisting peacefully with the State of Israel. The United States had obligated more than $2.9 billion in bilateral assistance to the West Bank and Gaza focused on further developing the Palestinian economic, social services, and civil society sectors and on strengthening the processes, governance, and security-providing capacity of Palestinian Authority (PA) institutions from fiscal years 1993 through 2009. An additional $400.4 million is planned for fiscal year 2010. Since June 2007, when Hamas-a U.S. designated terrorist organization-seized control of the Gaza Strip, the United States has directed most of its assistance to the West Bank. The U.S. Agency for International Development (USAID) is primarily responsible for administering Economic Support Fund (ESF) appropriations. Fiscal year 2008 and 2009 ESF funds support, among other things, priority needs identified in the 2007 Palestinian Reform and Development Plan, as well as humanitarian needs in Gaza following the Israeli-Hamas conflict there from December 2008 through January 2009. For fiscal years 2008 and 2009, the Congress mandated that the Comptroller General of the United States report to the Congress on U.S. assistance to the West Bank and Gaza. In response to these mandates, this report (1) examines the status of USAID's obligations and expenditures of the fiscal years 2008 and 2009 ESF appropriations for the West Bank and Gaza and (2) describes how the USAID mission is obligating the fiscal years 2008 and 2009 funds. In addition, in response to the mandate in the Consolidated Appropriations Act of 2008, we previously reported on the extent to which USAID has complied with its policies and procedures to help ensure that its programs do not provide support to entities or individuals associated with terrorism in the West Bank and Gaza.

Of the approximately $1.17 billion in ESF assistance provided by the United States to the West Bank and Gaza from fiscal years 2008 and 2009 ESF appropriations, USAID obligated a total of about $1.16 billion and expended $678.5 million, as of December 31, 2009. More specifically, as of this date, USAID obligated 100 percent and expended over 80 percent of fiscal year 2008 ESF funds for the West Bank and Gaza. For fiscal year 2009, USAID obligated approximately 98 percent and expended 47 percent of the ESF funds, as of December 31, 2009. The USAID mission in Tel Aviv reported that it plans to obligate the remaining $8.3 million in fiscal year 2009 ESF funds prior to the end of fiscal year 2010. The total of $1.17 billion in ESF funds for fiscal years 2008 and 2009 represented a large increase from previous years' appropriations, which totaled $448.7 million from fiscal years 2004 through 2007. USAID's West Bank and Gaza mission obligated $1.15 billion in fiscal year 2008 and 2009 ESF assistance primarily for projects in five sectors: water and infrastructure, democracy and governance, health and humanitarian assistance, private enterprise, and education. This assistance funds humanitarian, development, and reform projects mainly throughout the West Bank and, to a lesser extent, Gaza. Overall, USAID directed most of the fiscal year 2008 and 2009 ESF funding to the water and infrastructure sector, followed by the democracy and governance sector and health and humanitarian assistance sector. In addition, USAID also provided a total of $500 million from the $1.15 billion in obligations to the PA in three separate cash transfers for direct budgetary support. USAID officials stated that political and security conditions severely limited their ability to fund projects in Gaza in fiscal year 2008. A USAID official reported that USAID plans to commit up to $86 million in fiscal year 2009 ESF funds for humanitarian assistance and recovery projects in Gaza; however, their ability to undertake all of these planned activities is uncertain.